Can real options explain financing behavior?

• 成果类型: Article
• 署名作者: Tserlukevich, Yuri
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.11.003
• 发表日期: 2008
• 页码: 232-252
• 关键词: capital structure; Real options; corporate tax

摘要

Trade-off models commonly invoke financial transaction costs in order to explain observed leverage fluctuations. This paper offers an alternative explanation based on real options. The model is frictionless on the financing side but incorporates irreversibility and fixed costs of investment. Results obtained from Simulating the model are broadly consistent with observed financing patterns. Market leverage ratios are negatively related to profitability, mean-reverting, and depend on past stock returns. The gradual and lumpy leverage adjustments can occur in the absence of financial transaction costs. This evidence shows that incorporating real frictions into structural models increases their explanatory power. (C) 2008 Elsevier B.V. All rights reserved.